Overseas Factory Job Return is NOT Unemployment Answer

There is still a sizable core of economic analysts who believe that bringing factory jobs back to the U.S. is the answer to reasonably full employment. They’re dead wrong as recent history on relevant statistics proves.

Even before the late 1970's, when overseas imports become a major factor, manufacturing had shown a significant shrinkage in the great number of “hands-on” factory jobs. In 1953, manufacturing amounted to 28% of U.S. gross domestic product of goods and services. By 1980 that had dropped to 20% and reduced to an all-time post recession low by 2012. Over that time period U.S. GDP increased from $2.6 trillion to over $16 trillion, a sextupling in 60 years. This shrinkage of manufacturing employment went from 16 million in 1953 (about a third of total non-farm employment) to 12 million in 2012 (a tenth of non-farm employment).

While work transfers abroad to low cost developing nations have played a role in this metamorphosis, the rapid evolution of technology and transition to service industries-- hotels, hospitals, media communications, plus accounting, engineering, and the switch to computerization-- have played an even more important role in the areas of management, technical support, and marketing. Over the past 30 years, which includes both economic booms and busts, manufacturers have spent more on labor-saving machinery and hired far fewer, but more highly skilled workers to run it.

When defining productivity over the past three decades, output per hour worked increased 85%. In direct manufacturing alone, output per hour climbed 189%. While the world’s developed counties (such as the U.S., Western Europe, and Japan) have led in the fastest decline of manufacturing jobs, and the rise of service jobs, statistics indicate that where the shift from manufacturing jobs occurred has been the most rapid. Wages per capita have also climbed the fastest.

An increasing amount of low-skilled, low-wage supported production has been taken over by such Southeast Asian emerging nations as Vietnam, Bangladesh, Philippines, Indonesia, and Thailand, which have become dominant in the textile and other low-skilled areas. Even China and India, the world’s two most populous nations, have graduated to more sophisticated manufacturing sectors, such as electronics, transportation equipment, and computerized equipment.

While the laudable, but not very ineffective, drive “back to America” has returned a trickle of manufacturing jobs, due to higher wages and transportation costs from abroad, these have begun to turn more to Mexico which has the benefit of proximity to the U.S. It also provides “maquiladoras,” which are tax-sheltered and otherwise free of add-on costs, like other goods manufacturers located south of the border.

While President Obama may continue to call for the return of massive high-grade manufacturing jobs back to the U.S., he’s whistling past the grave yard while attempting to fulfill pledges with non-responsive rhetoric.

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